Asiafle- broke its long-term uptrend line

Results Update

For QE31/3/2011, Asiafle's net profit increased by 10% q-o-q or 8% y-o-y to RM12.6 million while turnover was up 11% q-o-q but dropped 10% y-o-y to RM65 million. The improved bottom-line was attributable to improvement in operation efficiency & successful passing of costs to customers.


Table: Asiafle's last 8 quarterly results



Chart 1: Asiafle's past 25 quarterly results

Financial Position

Asiafle's financial position as at 31/3/2011 is considered satisfactory with current ratio at 2.8 times & debts to equity at a negligible 0.1 time.

Valuation

Asiafle (closed at RM4.01 on May 27, 2011) is now trading at a PE of 9.1 times (based on last 4 quarters' EPS of 43.88 sen). Due to the declining sales & profitability over the past 3 years, this stock may not be able to command a PE multiple above 10 times. As such, its upside is very limited.

Technical Outlook

Asiafle has broken below its long-term uptrend line at RM4.40 in early May. last week, it broke below the horizontal line RM4.10. These double breakdowns cast a bearish outlook for Asiafle.


Chart 2: Asiafle's monthly chart as at May 27, 2011 (Source: Tradesignum)

Conclusion

Based on Asiafle's bearish technical outlook and struggling financial performance over the past 3 years, Asiafle is now rated as a SELL. This is despite the slight improvement in its bottom-line as noted above.